MARKET REPORT: Investors cheer Footsie's future

Joe and Joan Public are obviously enjoying summer in the City.
A survey conducted by Lloyds TSB Private Banking tells us that private investors are more positive on UK stocks than at any point in the last six months.

An improving economic outlook and better-than-expected results from several blue chip companies during the current half-year has swelled overall confidence in the market.

UK shares are now the most popular asset class, behind UK property. With investment returns elsewhere still pitiful, it’s not a place for the man in the street to put his/her cash.

Positive: UK shares are now the most popular asset class, behind UK property

The powers that be suggest the stockmarket will be suitably primed for the forthcoming early sale by the Government of all, or part, of its 39 per cent stake in Lloyds Banking Group, 1.4p easier at 75p.

There is also a little matter of the planned flotation of Royal Mail. It is expected to be valued at around £3billion, which will make it one of the biggest UK stockmarket flotations since utilities were privatised in the 1980s.

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The privatisation is driven by the boom in parcel delivery which has helped Royal Mail to more-than-double its profits last year, after years of losing money.

The authorities will therefore want the Footsie to behave itself in the lead up to the multi-billion sell-offs, but there remains a potential banana skin across the pond.

The elite index dropped 34.26 points to 6,465.73 ahead of tomorrow’s publication of the minutes of the last Federal Open Market Committee meeting which could give clues as to when the Fed will scale back its $85billion a month asset purchases. Wall Street closed 70.73 points lower at 15,010.74.

The old jackanories are always the best during the summer malaise. Britain’s third biggest drugs group Shire was chased up to 2470p before closing 24p better at 2409p on revived US bid hopes.

Demand was fuelled by a weekend report that the group had hired Lazards to strengthen its defence against a US bid, possibly from Bristol Myers Squibb.

The US drugs group along with Germany’s aspirin discoverer Bayer AG, Viagra maker Pfizer and Crestor manufacturer Astra Zeneca have all been mentioned as possible bidders for Shire over the past 12 months.

Shire’s chief executive Flemming Ornskov came from Bayer and had a baptism of fire when the shares tanked on his second day in the job following a costly write-off in the value of a treatment for diabetic foot ulcers.

Oil services group John Wood gushed 20p to 903p on hopes that it could attract a bid from the group that loses out in the takeover battle for Kentz. Shares of the latter soared 115.1p to 591p after its board rejected a bid of between 565p and 580p from Amec (1p dearer at 1085p) and a lower offer from German construction group M+W, which is owned by private Austrian conglomerate Stumpf.

Marks & Spencer rose 6.2p to 459.5p following publicity given to its high profile advertising campaign for its make-or-break autumn/winter fashion range which will appear in stores next month. It features Oscar-winner Dame Helen Mirren, Strictly Come Dancing judge Darcey Bussell and artist Tracey Emin.

Vedanta Resources lost 35p to 1200p following completion of the merger of two of its subsidiaries, Sesa Goa and Sterlite Industries.

Glencore Xstrata slipped 6.4p to 301.95p amid reports it will write down the value of assets inherited from Xstrata by as much as $7bn when it reports half-year results today.

Strong interim results helped Inspired Energy improve 0.38p to 7.62p. Revenues soared 65 per cent to £3.5million and earnings rose 49 per cent to £1.6million. A maiden interim dividend of 0.05p is to be paid.

Shore Capital say the shares remain undervalued and a re-rating is justified.
Social housing leader Mears, which reported record half-year results last week, improved 2p to 415p after Liberum Capital lifted its target price to 485p from 420p.

The broker says Mears does not look expensive relative to a peer group that has re-rated along with the market. There is hidden value at Morrison which is currently ‘under-earning’ and current estimates look cautious.

The board has continued to acquire short-term development opportunities in the North London area whilst advancing the existing development portfolio towards completion and onward sale. It last month acquired a property in Muswell Hill for £4.65million.